The $100,000 H-1B visa fee is a hindrance to the competitiveness of key US industries

The change introduced by the Donald Trump administration, which included the payment of a $100,000 fee for H-1B visas, has been presented primarily as a way for U.S.-born workers to qualify for jobs in the IT sector and to reduce salary abuses involving highly skilled foreign workers accepting lower wages than local employees. But many economists — including one of the co-authors of the report that the government relied on to impose this practically prohibitive fee — point to the net positive contribution these visas have in attracting talent to key sectors, the labor market, and the immigration system. And they warn that the measure complicates the country’s future competitiveness in key industries.

The H-1B visa was created in 1990, during the presidency of George W. Bush. It typically lasts up to three years and can be extended, allows for the arrival of families, and also permits applications for permanent residency or a green card. Until now, the fees associated with its processing have always been low, and the cost for companies has been between $3,000 and $5,000.

Seventy-three percent of those who benefit firsthand from these visas are Indian-born because they meet the profiles currently in demand by the high-tech industry, primarily. Nearly 65% of the workers who obtained them two years ago work in the computing sector, and the employers who most requested them that year were Amazon, Cognizant Technologies, Infosys, Tata Consultancy, Google, Microsoft, Apps, Meta, and JP Morgan. These companies, most of which boast large and growing profits, are also the ones most likely to bear the cost of the new fee, which is shaping up to be unaffordable for startups, innovators, researchers, hospitals, and universities.

In its proclamation raising the cost of this visa, the Trump administration cited a 2017 study that found that — without the possibility of hiring foreign workers in IT — wages for American workers in this sector would have been up to 5.1% higher and employment could have been 10.8% higher in 2001. However, University of San Diego economics professor Gaurav Khanna calls the focus on this situation “narrow” because it only affects one type of worker.

“Tariff on talent”

Khanna is one of the co-authors of the study cited by the White House and explains to EL PAÍS that this visa, which is now astronomically more expensive, benefits the entire economy. “It has a very positive impact,” he clarifies. “It benefits everyone else, workers in the information technology sector, because when you have more computer scientists, you have to hire more employees in companies, more managers, more human resources personnel, and opportunities and salaries in the sector increase.” “The benefits to the economy as a whole outweigh the costs,” Khanna insists, referring to the negative impact on a certain number of specialized workers.

This is something the American Immigration Council (AIC) agrees with, citing a consensus of economists who point out that these foreign workers create new opportunities for native-born workers because they fill jobs that require specific skills and complement others needed around them. With them, employers often expand their operations within the country, seeking new opportunities in the United States rather than elsewhere.

“The idea that we can somehow reduce the number of H-1B visa applicants coming to the United States and then simply reallocate those jobs — those positions that would otherwise have gone to them — to American workers is not based on sound economic policy,” says Jorge Loweree, director of programs and strategy at the AIC. “That kind of one-for-one thinking, which assumes there are a fixed number of jobs in the United States at any given time and that any job an immigrant gains is taken away from a native-born worker, is flawed; it doesn’t take into account economic growth.”

Seeking talent abroad therefore presents an alternative. Sanchit Vir Gogia, chief analyst and CEO of the consulting firm Greyhound Research, says the model of companies with junior engineers on H-1B visas is over and anticipates the relocation of more operations abroad, in addition to greater automation. For Gogia, the new visa fee is a tariff on talent.

Domino effect that begins with AI

Loweree adds that this decision comes at a critical time because it coincides with the competition for the development of artificial intelligence. “Efforts are being made to innovate and lead in a sector with emerging technology, and this is something that will weaken our nation in favor of our global competitors. We are in a technological competition that will determine the balance of power for generations, and this couldn’t come at a worse time.”

Many large companies will continue to be able to rely on these visas, but startups, where most innovation occurs, will not be able to bear the new cost. And the AIC believes that this fee is devastating for the investigation of non-profit companies. However, clarification of many aspects of this policy, which raised alarm bells over the weekend, is still awaited.

If the use of this visa is dramatically restricted due to its high cost, the amount these immigrants spend and invest in the economy could also be lost. All of this also creates more jobs and more production, and therefore more growth.

Immigration expert Daniel Costa of the Economic Policy Institute explains that this commission is not a good solution to the problems that exist with this visa. “There will be unintended consequences; there are better ways to fix the problems,” he says. Costa criticizes the fact that the current rules do not prevent lower wages in the sector for those who hold this visa, that employment consulting firms benefit, and that there is no real search for native workers to fill the positions. However, the fact that it has these and other flaws cannot be fixed with a price increase, he argues.

On immigration, Loweree says this “is a very clear effort to undermine an entire program, to rewrite the law to eliminate a visa category through executive action rather than Congress.” He adds that the H-1B visa is also a critical tool for the entire employment-based immigration system because it allows access to permanent residency, or a green card. “The number of permanent residencies allocated each year for employment-based purposes is so small and hasn’t been updated in so long that it no longer reflects the needs of the country or our economy. And because of that, the waiting lists for those at the front of the queue — people who are theoretically eligible for permanent residency through employment, but are waiting to get their turn — are enormous,” he says. The H-1B visa used to be an entry point, but now Trump has erected a fiscal wall to block it.

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